Anatomy of a deal: How the Dolphins negotiated a stadium renovation with Miami-Dade County

Miami Dolphins owner Stephen Ross unveiled a major renovation to Sun Life Stadium on Jan. 14, sitting in front of a bright, wall-sized rendering of the upgrades and telling reporters to forget about a potential referendum asking voters to approve some public funding for the project.

“I mean, that’s really not a possibility,” he said, because the team was setting a tight deadline to have a renovation agreement in place by the time the 50th and 51st Super Bowls were awarded May 22. “There’s no possibility of that happening.”

He was wrong. Less than three months later, Miami-Dade commissioners gave tentative approval to a subsidized renovation to the Miami Gardens stadium — and scheduled a May 14 referendum to give voters a say.

The special election, which will take place only if state lawmakers approve Dolphins-backed legislation, was the first of several hard-fought concessions the Dolphins would make at the request of Miami-Dade Mayor Carlos Gimenez in closed-door negotiations. Crucial details, including how much the county would pay and for how long, were not resolved until the last, dramatic two-day marathon negotiation session, according to dealmakers from both sides, who over the past two weeks recounted how the final agreement came together.

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They negotiated under the political weight of recent history. The controversial deal to publicly finance most of the Miami Marlins’ new ballpark, approved without a popular vote, loomed over the talks. The Dolphins, who tried to avoid comparisons to the Marlins, and Gimenez, who doggedly opposed the baseball deal, vowed this time would be different.

In the end, the county agreed to hike the mainland hotel-tax rate to 7 percent from 6 percent and to pay the Dolphins up to $289 million over 26 years. In return, the Dolphins agreed to repay at least $112 million after 30 years, to be on the hook for up to $120 million in penalties if the stadium fails to host a certain number of major sporting events and to remain in Miami-Dade for the next three decades. If the National Football League doesn’t award Sun Life a Super Bowl next month, the entire agreement is off.

It began with the referendum — a condition Gimenez, after being asked by commissioners to sit down with the team, required before negotiations could proceed. The Dolphins, in what appeared like a strategic move to avoid the ballot box, had thought there would not be enough time to advertise and prepare an election by their self-imposed Super Bowl award deadline. But there was, because public notice for countywide elections that do not involve state or federal campaigns requires a mere 30 days — instead of 45 or 60, as the Dolphins expected.

The team agreed to the referendum in early February, with Dolphins CEO Mike Dee saying they were “never resistant” to the idea.

“We recognized the environment that was in place,” he told commissioners in April. “We recognized that the voters or the residents of Miami-Dade County had no appetite, no tolerance for anything that had taken place recently to happen again.”

THE TALKS BEGAN

Then the talks began in earnest. Miami-Dade hired financial and sports-facilities consultants. County staff toured the recesses of the stadium, where one Gimenez aide was unimpressed with its “tiny” kitchens.

A series of in-person sessions took place, mostly on Friday afternoons, in Gimenez’s offices on the 29th floor of County Hall. Ross, a billionaire real-estate developer whose business is based in New York, typically spends his weekends in South Florida.

The two sides met in a main conference room, splitting off during more tense moments for private sessions, with the mayor and his staff moving to Gimenez’s smaller conference room or in a deputy mayor’s office. A March 15 session stretched so late into the night that the building lights were turned off. Deputy Mayor Ed Marquez had to track down someone to turn them back on.

The first was for Miami-Dade to borrow money for the stadium renovation. No, said Gimenez, whose chief criticism of the 2009 Marlins deal was public financing terms that left the county on the hook for years of ballooning debt payments. The Dolphins would instead receive monthly payments collected from the increased hotel tax — which Gimenez compared to an economic development incentive — and use that as collateral to borrow money from the private sector, though how much and for how long took weeks to negotiate.

The second proposal, which Dolphins spokesmen repeatedly denied in public, was for the team to turn ownership of the stadium, which sits on county land, over to Miami-Dade in return for its renovation investment.

The Dolphins floated the idea that they could convey ownership at the end of the 30-year agreement, noting they could commit to paying the county the equivalent of the stadium’s roughly $3 million annual property-tax bill. The team publicly touted that Sun Life is the only local sports facility to pay property taxes.

But Gimenez didn’t want the county to take on stadium maintenance and upkeep costs.

“I have no particular interest in owning any part of the stadium,” Gimenez said in a Feb. 15 radio interview.

The idea was taken off the table

Gimenez also made a request the Dolphins declined: to move the team’s training facilities to Miami-Dade from Nova Southeastern University in Broward. Commissioners had specifically asked for that change, but it was a non-starter with the Dolphins, who argued they had a long-term lease and a significant investment in the Davie facilities. Eventually, the team promised commissioners to consider moving once its lease is up.

Two of the mayor’s other conditions were accepted, but not without complications.

Gimenez wanted the deal to be contingent on the award of Super Bowl 50 or 51 — a suggestion the NFL initially opposed, though the league quickly backed off a stern statement it had issued to reporters. An outwardly confident Dee returned from NFL owners meetings in March and agreed to the concession.

NFL STILL UNHAPPY

But behind the scenes, the NFL was apparently still unhappy, worried that making public dollars for a stadium renovation contingent on a specific Super Bowl award would set a precedent for other teams. How about softening the condition, the team asked the mayor, to say the Dolphins would have to be awarded a Super Bowl — not necessarily the 50th or 51st — in May instead? No, Gimenez said.

The Dolphins told him they would take their concerns to the commission. There, they prevailed: Commissioners signed off on an amendment removing the specific mention of the 50th or 51st Super Bowls from the agreement.

Gimenez’s other condition was having the Dolphins foot the bill for the $4.8 million cost of the special election. A state opinion appeared to prohibit that possibility. The mayor asked for a new one, and the team eventually said it would be willing to fork over the money. But Gimenez cautioned the Dolphins that if the opinion didn’t favor the team — or if it didn’t come back in time — there would be no referendum before NFL owners’ May 21-22 meeting awarding the Super Bowls. There were murmurs of a June election.

The Dolphins held their breath until April 5. The state ruled they could pay.

Throughout the negotiations, the two sides had discussed how much county money would be involved in the deal, and what guarantees Miami-Dade would receive for the funding. The Dolphins provided team and stadium financial information to the county. A 30-year non-relocation agreement requiring the Dolphins to stay at Sun Life came about relatively easily.

Both sides also agreed on a point system crediting the Dolphins for hosting events at the stadium, and penalizing them if they didn’t meet certain goals. Ross, who last week announced that Sun Life would host games for a new international club soccer tournament this summer, had wanted more points for soccer matches over which he could exert more influence than, say, college football championships. The county pushed back, saying it would award the most points to events proven to attract out-of-town visitors who would spend money locally.

ISSUE OF PAYOUT

The last issue came down to the county’s payout.

An undated, draft term sheet obtained by The Miami Herald in late March showed the Dolphins receiving three-quarters of the money collected by the hike in the hotel tax over 30 years. But both the percentage and number of years were a subject of debate until the very end.

The Dolphins wanted 75 percent of the roughly $10 million the higher hotel tax would be expected to raise in the first year of the deal — $7.5 million. They also wanted the payments to last for 30 years so they could secure a better loan from the private sector, using the county dollars as collateral.

Gimenez began the negotiations with a lower percentage, at one point suggesting giving the Dolphins $6 million or $6.5 million on year one, and wanted the payments to stop sooner or the Dolphins to refund some of the money earlier.

Financial advisors for the county ran hotel-tax projections. Financial advisors for the Dolphins ran loan projections. Back and forth they went. Dealmakers, meeting since about 11 a.m. Sunday, April 7, at Sun Life, moved to County Hall, where they spent the night and worked nonstop through Monday night.

The compromise: The Dolphins would receive either 75 percent of the money raised every year, or $7.5 million a year, growing at 3 percent every year, whichever is lower. That deal would last 26 years, with the county’s projected expected to total $289 million.

The team would have to refund at least $112 million at the end of 30 years.

The final, major point of contention had been resolved. A Dolphins staffer snapped a cell phone picture of Dee shaking Gimenez’s hand. It was posted to Dee’s Twitter account at 9:44 p.m.